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(Kitco News) - Newmont Mining Corp. (NEM) officials Friday described a picture in which improved performance from its North and South American operations has helped offset challenges in the Asia-Pacific region, leaving its full-year output guidance intact.

The world’s second-largest gold-mining company is maintaining a dividend program meant to return value to shareholders despite a negative cash flow this year and next, looking for cash flow to then pick up with increasing production, officials said.

Newmont management broke down the most recent quarter during a mid-morning conference call with analysts following the late-Thursday release of its third-quarter earnings report.

Newmont reported net income from continuing operations of $400 million, 81 cents per share, down 19% from $493 million, or $1 per share in the third quarter of 2011. Excluding special items, adjusted net income was $426 million, or 86 cents per share, down from $635 million, or $1.29 per share, for the prior year quarter.

Newmont reported consolidated revenue of $2.5 billion, a 10% decrease from the prior-year quarter. The average realized gold price of $1,659 an ounce was down 2%, but the average copper price of $3.55 a pound was up 21% from the same period a year ago.

Cash flow from continuing operations of $578 million, down 54% from the third quarter of 2011. In fact, Chief Financial Officer Russell Ball indicated that with planned dividend payouts, debt payments, operating expenses, capital expenditures and lower cash flow from Batu Hijau operations in Indonesia, the company will spend more than it earns through 2013, but then this is expected to reverse.

“A number of analysts have picked up on this and commented on the sustainability of the dividend in light of this negative free cash flow in the short term,” Ball said. “However, we have to manage this capital-intensive business for the long term. As we looked out beyond 2013, we saw significant free cash-flow generation as production ramped up and cap-ex decreased, even at our conservative $1,500-an-ounce gold-price assumption.”

In fact, he said, with a focus on cutting costs and a higher-than-budgeted price for gold, Newmont is nearly $1 billion ahead of what it expected on a free cash-flow basis, compared to the 2012 budget. “In short, the strength of the balance sheet and our ability to sustain the current dividend is a function of the gold price,” he said.

Newmont earlier this week announced a quarterly gold-price-based dividend of 35 cents per share, the same as a year ago. Based on the current share price, this equates to a yield of around 2.5%, said Richard O’Brien, president and CEO. The dividend will be payable on Dec. 28 to shareholders of record as of Dec. 6 and brings the company’s dividends for the year to $1.05 per share, up 62% from last year, officials said.

The company’s dividend is based on the London Metal Exchange afternoon average fixing of $1,652 per ounce for the third quarter, and Newmont officials said they anticipate the bull market in gold will continue. Ball cited liquidity from global central banks, gold buying by central banks, demand from gold-backed exchange-traded funds and lack of producer selling.

“Today’s spot price of around $1,700 an ounce remains approximately 30% below the inflation adjusted average—depending on which index you use as a measure of inflation—than in 1980, the peak year of the previous bull market,” he said.

3Q Output Declines; Americas Partially Offset Losses Elsewhere

Gold and copper production of 1.2 million ounces and 35 million pounds was down 5% and 38%, respectively, from the prior-year quarter. Gold and copper sales of 1.2 million ounces and 37 million pounds were down 4% and 27%, respectively, from the year-ago period.

Newmont reported a 7% year-on-year rise for production in Nevada to 457,000 ounces. The company reported an 8% increase at the Yanacocha mine in Peru to 182,000 ounces, with recovery and ore grades higher than expected. Also, higher copper prices added to overall revenues, Newmont said.

But countering this were “challenges” in the Asia-Pacific and African regions, O’Brien said.

Production fell to 16,000 ounces from 133,000 a year ago, while costs rose, at Batu Hijau in Indonesia due to planned Phase 6 stripping, Newmont reported. Further, Newmont was not able to mine higher-grade ore at the bottom of the pit, as expected, due to a wall failure. Elsewhere, output was affected by previously announced lower ore tonnage and grade mined at Tanami in Australia, slightly lower grades at Ahafo in Ghana due to mine sequencing, and lower mill availability and recoveries at Boddington in Australia.

Still, “we remain on track to meet full-year production guidance for 2012, although likely at the low end of the 5 (million) to 5.1 million-ounce range,” O’Brien said.

The company anticipates being at the high end of its narrower outlook range for costs applicable to sales of between $650 and $675 per ounce. Newmont also increased its 2012 copper-cost outlook to between $2.20 and $2.35 per pound.

Gary Goldberg, president and chief operating officer, said Newmont expects overall fourth-quarter output to rise. Higher North American and Asia-Pacific production are expected to offset slightly lower output in South America and relatively flat production in Africa.

“I want to emphasize this is not an effort to boost quarter four at the expense of early 2013 results,” he said. “Rather, it reflects where we are today in the various mine plans.”

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